CORPORATE AND PROFESSIONAL UPDATE JANUARY 13,2016
- Income Tax 1st Amendment Rules, 2016 Notified vide notification no. 3/2016/2015.
- Corrigendum to Notification No. 93/2015 dated 16/12/2015 has been issued vide Notification No 1/2016 – Dated 12-1-2016.
- Service of an independent contractor – whether would be taxable as salary contrary to the contract of service – Whether it is professional or skilled work; nature of establishment and the right to reject are also required to be scanned before arriving at the conclusion of the employer-employee relations. Suresh Kumar Hooda Versus The Commissioner of Income Tax, Rohtak and another.
- Allowability of exemption u/s 10(1) – For earning agricultural income it is not necessary that the assessee must own the land and it is enough if it is established that the agricultural organizations have been actually carried on by the assessee. Monsanto India Ltd Versus Addl Commissioner of Income Tax.
- Protocol amending the agreement between Government of the Republic of India and the Government of the Republic of Belarus for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on property (Capital) notified vide notification no. 2/2016.
- Transfer pricing adjustment – TPO take the amount of ALP at NIL – determination of Management Consultancy Fee – foreign exchange loss in financial transactions cannot be considered as service charge for the intra group- (M/s. DQ Entertainment (International) Ltd, Versus Asst. Commissioner of Income Tax, Circle-1 (2) , Hyderabad – 2016 (1) TMI 451 – ITAT HYDERABAD).
- Reopening of assessment – it is evident that the AO did not corroborate or examine the information received from the investigation wing before recording his own satisfaction of escaped income and initiating the reassessment proceedings. – Notice u/s 148 quashed – Tri – Income Tax- (Vardai Overseas (P) Ltd. C/o Shri V.K. Sabharwal, Adv. Versus Income Tax Officer, Ward-8 (3) , New Delhi-2016 (1) TMI 450 – ITAT DELHI)
- IT:Service of an independent contractor – nature of establishment and the right to reject are also required to be scanned before arriving at the conclusion of the employer-employee relations – Suresh Kumar Hooda Vs. CIT, Rohtak and anr (Punjab & Haryana High Court).
- DTAA:Amendment made in the Agreement between Republic of India and the Government of the Republic of Belarus to make the treaty effective from 19 NOV 2015 – Notification No.2/2016, Dt.13th Jan 2016.
- IT: Addition u/s 68 – cash credit – the alleged surplus cash accumulated in the cash book out of the withdrawals from the bank is to be considered as source of re-deposit – Minalben Dipakbhai Mehta Vs. ITO, W-3(3) Suat (ITAT Ahmedabad)
- ITAT affirms sanctity of CA certificate; denies to impose penalty for TDS default relying upon such certificate  65 taxmann.com 68 (Mumbai – Trib.) ADIT (IT) v. Leighton Welspun Contractors (P.) Ltd.
- On foreign travel of directors disallowed as company had no business in such locations  92 (Bombay) Advance Power Display Systems Ltd. v. CIT
- Trading in derivate can’t be held as speculative if co. has only income from other sources
 62 (Delhi – Trib.) A.K. Capital Markets Ltd. v. DCIT
- TDS u/s 194J – Procurement of ready study data by the parent company from another foreign company and supplying it to the assessee amounts – Non deduction of tds on technical services rendered to a resident – No TDS required. Commissioner of Income Tax (Tds) Versus Heramec Ltd – 2016 (1) TMI 503 – ANDHRA PRADESH HIGH COURT
- Addition u/s 68 cash credit – the alleged surplus cash accumulated in the cash book out of the withdrawals from the bank is to be considered as source of re-deposit. Smt. Minalben Dipakbhai Mehta Versus ITO, Ward-3 (3) Suat. – 2016 (1) TMI 489 – ITAT AHMEDABAD
- Initiatives taken by CBDT to reduce litigation
- Now CBDT would issue refunds up to Rs. 5,000 without adjustment of outstanding tax liability
- CBDT notifies forms for accumulation of income by a trust
- Disallowance on account of interest expenses u/s.40A(2)(b) – the unsecured loan was required to be paid on demand but in the case of related parties there was no such condition. We are of the considered view that the interest 18 is reasonable- (Asian Mills Pvt. Ltd. Versus Deputy Commissioner of Income Tax, Addl. Commissioner of Income Tax – 2016 (1) TMI 449 – ITAT AHMEDABAD).
- Disallowance u/s 14A gets attracted even if a mix of interest bearing & non-bearing funds used to make investments earning exempt income [M/s Thermotech Engineering vs. ACIT, Pune (ITAT Pune), ITA No.- 533/PN/2013, A.Y 2009-10].
- Cancellation of Registration u/s 12AA(3) should be based on activities of Trust and not of Trustees [Friends of WWB India vs Director of Income Tax-Exemption (ITAT Ahmedabad), ITA No. 2076/Ahd/2014, A.Y 2009-10].
- IT: Addition u/s 68 – The existence of shares of 1,50,000 in the hands of assessee was established by filing concerned demat account. Therefore the conditions for making addition under section 68 were missing – ACIT-13(3), Mumbai Vs. Late Shri Himatlal H. Dadia (ITAT MUMBAI)
- Initiation of penalty proceedings u/s 271(1)(c) without specifying basis makes such proceedings void -ab-initio.
- Benefit of reduced penalty allowed if duty and interest paid within 30 days of communication of SCN/order [Principal Commissioner of Service Tax vs. Tops Security Ltd (Delhi High Court); CEAC 42/2015].
- Tax Reforms Committee submits its first report – Recommends presumptive scheme for professionals, lower TDS rates
- IT: Easwar Committee suggested several taxpayer-friendly measures to improve ease of doing business, reduce litigation and accelerate the resolution of tax disputes, such as:
- Simplifying provisions related to TDS and increase in threshold for payment subject to TDS
- TDS rates for individuals be reduced to 5% from 10%
- Deletion of Section 143 (1D) to avoid undesirable delay in issue of refund
- Making the process of refunds faster and pay 12-18% interest if refund issued beyond 6 months.
- Payment of Interest on refund due out of Self Assessement Tax
- Stock trading gains of up to Rs.5 Lac to be treated as capital gains and not business income
- Deptt. to desist from the practice of adjusting tax demand of a taxpayer whose tax return is under assessment against legitimate refunds due.
- Deferring the contentious Income Computation and Disclosure Standards (ICDS) provision.
- IT: Disallowance on account of bogus purchases – Merely because notices u/s 133(6) could not be served on the suppliers assessee- buyer cannot be put to an inconvenience of disallowance when he has provided the correct address of those parties – DCIT Versus Norma India Ltd. (ITAT Delhi)
- It is here by seeked to further amend notification No 12/2012-Central Excise dated 17.03.2012 so as to increase the Basic Excise Duty rates on Petrol and Diesel(both unbranded and branded).
- Introduction of Tariff Notification in respect of fixation of tariff value of Edible Oil, Brass, Poppy Seed, Areca Nut, Gold & Silver.
- Activities of street light maintenance cannot be equated with maintenance of road bridge tunnel etc. – Exemption not available – In Re : K. Ram Mohan – 2016 (1) TMI 543 – AUTHORITY FOR ADVANCE RULINGS, NEW DELHI
- Area based exemption – substantial expansion by way of installed capacity by not less than 25 – Notification No. 50/2003-CE dated 10/6/03 – it was contended that production capacity of the both the units are to be counted as one – benefit of exemption allowed- CCE, Meerut – II Versus M/s Prakash Straw Board Pvt. Ltd. – 2016 (1) TMI 521 – CESTAT NEW DELHI
- ST: Activities of street light maintenance cannot be equated with maintenance of road bridge tunnel etc. – Exemption not available – K. Ram Mohan (Authority for Advance Rulings, New Delhi).
- ST: Govt. is considering higher Service Tax Exemption Limit to benefit small service provides.
- Likely to hike Service Tax exemption threshold for small service providers “service tax exemption threshold limit could be hiked from Rs 10 lakh to Rs 25 lakh.” said a government source.
- Service-tax: ‘Mistaken payment’ of service tax in excess of actually payable amount amounts to ‘deposit’ and time-limit of section 11B would not apply to refund thereof  57 (Ahmedabad – CESTAT) Nobles Constructions Gujarat (P.) Ltd. v. Commissioner of Service Tax.
- Mobile phone and courier services used for business purposes are eligible for credit  65 taxmann.com 88 (Ahmedabad – CESTAT) Commissioner of Central Excise & Service Tax v. Miranda Tools
- ST: Restoration of appeal – CESTAT dismissed the appeal for non compliance of stay order – the delay of 5 days in depositing the amount is condoned – appeal restored before the tribunal – M/s MPA Marketing Pvt. Ltd. Vs. CESTAT & anr (Punjab And Haryana High Court)
- Levy of personal penalty on co-noticees – when the proceedings against the manufacturer/assessee stand concluded on payment of disputed amount of duty plus interest plus 25 of the duty as penalty there would be no sense in continuing the proceedings for imposition of penalty under Rule 26 against other persons like traders who had purchased the goods – (Commissioner of Central Excise And Customs Aurangabad / Nashik – II Versus Ambika Waste Management Pvt Ltd, Ambadas Santosh Ngargoje, Harishkumar Harjivandas Gandhi, Shree Salasar Ispat Pvt Ltd – 2016 (1) TMI 438 – CESTAT MUMBAI).
- Cenvat Credit – Eligible input services – Other welfare service i.e. service tax paid on the services of purchase of gift and setting up of mandap in the factory premises for celebrating Dussera festival is not eligible to be held as credit as this seems to be not connected with the business of the appellant- (Mahindra Casting Ltd. Versus Commissioner of Central Excise, Pune I – 2016 (1) TMI 437 – CESTAT MUMBAI).
- VAT: Form GE-I & GE-II for the period from Apr, 2015 to Dec, 2015 to be furnished by 15 FEB 2016. Notification, dt.12 JAN 2016.
- DVAT:– All Govt Entities having their offices functioning within NCT of Delhi are required to furnish an Quarterly Return in ‘Form GE-II’, of purchases made by them for purpose of consumption or use by them from the dealers registered under the Act and having a valid TIN.
- Restoration of appeal – CESTAT dismissed the appeal for non compliance of stay order – the delay of 5 days in depositing the amount is condoned – appeal restored before the tribunal- M/s MPA Marketing Pvt. Limited Versus Customs, Excise and Service Tax Appellate Tribunal and another – 2016 (1) TMI 482 – PUNJAB AND HARYANA HIGH COURT
- ST: Incentive received for achieving the targets is not excludible from the assessable value of the service which as per Sec-67 is the gross amount received for the service rendered – M/s Hari Om Telecom Vs. CCE, Chandigarh (CESTAT New Delhi)
- Likely to hike Service Tax exemption threshold for small service providers
It may enhance to 25 lacs.
- Delhi VAT authority isn’t empowered to pass an order until power thereof is delegated by Commissioner 103 (Delhi) Yongnam Engineering & Construction (P.) Ltd. v. Commissioner, DVAT
- DVAT: Due date to file Form-9 (Online Reconciliation Return) extended to 29.2.16. Cir.No.34, dt.15.01.2016.
- Delhi VAT-Filling of reconciliation return for year 2014-15- Date extended to 29.02.2016.
- Increase in Excise Duty on Petrol by 75 paise and on Diesel by Rs. 2 per litre [Notification No. 2/2016-Central Excise]
- ST: Refund – service tax was mistakenly paid – amount paid by the appellant under Manpower Recruitment Agency Services is required to be refunded because no tax can be collected without the authority of law –Sharam Sewa Associates Vs. CCE, Allahabad (CESTAT Allahabad)
Query: A Private Limited company accepted unsecured loan from its existing two Directors. This is exempt deposit under section 73 of the Companies Act, 2013. Subsequently above two Directors resigned from the Directorship of the Company. Is the loan becomes deposits after their resignation? Is the loan becomes repayable after resignation not to attract deposit Rules?
Answer: There is no necessity to repay the loan immediately and at the time of acceptance of loan from the person who has given loan were directors of the company and the money can be retained till the date of maturity.
Query:Whether Security Deposit given to Director for taking his premises on rent will attract section 185? Please Guide.
Answer: Yes, it attract section 185 but not applicable in case of private company if- a) In share capital of private company, no other body corporate has invested any money and, b) If the borrowings of such company from banks/ Financial Institutions/ body corporate is less than twice of its paid-up capital or Rs. 50 Crore (Whichever is lower) and, c) Company has no default in repayment of such borrowings, and also not applicable in case of public company, if- loan given to a M.D or W.T.D as part of conditions of service or Approved by a Special Resolution.
Query:One company is having 1 subsidiary and 2 associates companies as on 31.03.2015. Whether consolidation of all the companies is required or only the consolidation of subsidiary companies?
Answer: As per Section 129(3) of the Companies Act 2013, where a company has one or more subsidiaries, it shall, in addition to financial statements provided under sub section (2), prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company along with the laying of its financial statement under sub section (2). Further explanation to this sub section provides that “the word subsidiary shall include associate company and joint venture”.
Query: Kindly provide me the Consent letter format for conducting EGM at shorter notice?
Answer: Unlike the Companies Act, 1956, the MCA does not provide any format. Even there is no format provided in the Rules. In fact proviso to sub section 1 of section 101 only mentions that the shorter notice to be given by the shareholders. Wherever in the MCA the section mentions that “as may be prescribed” the same has been provided by the Rules. As the phrase “as may be prescribed” is not mentioned in the section, the presumption is that no format would be prescribed. Thus liberty has been granted to the shareholders with regard to the fomat of the notice. The safe course would be to follow the form 22A prescribed under the Companies Act, 1956 with requisite changes.
CORPORATE SOCIAL RESPONSIBILITY
Query:What is meaning of ‘any financial year’ mentioned in Section 135 (1) of the Companies Act, 2013?
Answer: “Any Financial year” referred under Sub- Section (1) of Section 135, implies any of the three preceding financial years
Query: Compliance under section 135 of the Act i.e. Corporate Social Responsibility, is applicable from which Financial Year?
Answer: the spending of requisite amount on CSR activities came into force from April, 2014.
- Central Government has notified 13th day of January 2016 as the date from which commencement if section (5), (6), (7) of Section 125 of Companies Act, 2013 come into force except with respect to manner of administration of the Investor Education & Protection fund.
- MCA has issued Frequently Asked Questions (FAQs) with regard to Corporate Social Responsibility under section 135 of the Companies Act,2013 vide General Circular 1/ 2016 dated 12.01.2016.
- MCA: Services on the www.mca.gov.in portal will not be available from 08:00 AM to 06:00 PM on Saturday, 16th JAN 2016 due to periodic maintenance activities.
- Startup India: Hon’ble PM Modi launches Startup India Program on Sat, 16 JAN 2016 to boost innovation based business with many incentives and ease of doing business.
- ICAI: Result of the CA Final Exams held in Nov’ 2015 and CPT Exams held in Dec, 2015 declared y’day (17-01-2016) – Congrats who cleared and all the Best who appears next time.
- We congratulate our CA students, who have passed exams. CA result analysis: CA final both group 5.75 %, Group 1- 12.61%, Group 2- 11.99 %, CPT -34.45 %.
- Sovereign Gold Bonds, 2016 to be open for subscription from 18.01.2016 to 22.01.2016 vide its Notification F.No. 4(19)-W&M/2014 dated 14.01.2016.
- Rules for the Investor education & protection fund authority (Appointment of Chair Person and Members, holding meeting and provision for offices and officers) Rules 2016.
- All Govt. entities in Delhi to file return for purchases made by them for purpose of consumption
- New Juvenile Justice Act comes into force from Jan 15, 2016.
- Stamp duty paid to increase authorised capital is capital expenditure  65 taxmann.com 94 (Mumbai – Trib.) Inventurus Knowledge Services (P.) Ltd. v. ITO
- CCI: Shri Devender Kumar Sikri, an officer of 1975 batch IAS took oath as Chairman of Competition Commission of India (CCI).
- SEBI: SEBI has established its Local Office at Jammu under the administrative control of its Northern Regional Office at New Delhi.
- ICAI has extended last date “for complying with the CPE hours requirement for the Calendar Year 2015” – from 31st December, 2015 to 31st March, 2016.
- Applicability of MRP based valuation to institutional buyers for goods specified U/s. 4A of Excise Act.
- Refund allowable where Service tax is paid twice by Appellant due to clerical error [Tikaula Sugar Mills Ltd. Vs. CCE, Meerut-I (2015 (12) TMI 884 – CESTAT New Delhi)].
- Rent-a-cab services to SEZ Unit for transportation of its staff to and from their residence is exempt from Service Tax.
- Minister of State for Finance Jayant Sinha on Thursday said that the government will present the Budget for 2016-17 on February 29, 2016.
- Section 80IB(10) – Canopy/ Porch cannot be treated as part of Built up Area as it is not habitable [DCIT vs. Smt. Suman Jagannath Pharande (ITAT Pune)].
- Revision valid under section 263 where AO has not made any enquiry about quantification of losses claimed [ITAT Delhi in the case of G. E. Money Financial Services Ltd. vs. DCIT].
- Being ownership vest with lessor in leased including sale & lease back assets, depreciation u/s 32 allowed [ITAT Mumbai in the case of ICICI Ltd. vs. ACIT].
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